Senator IAN MACDONALD (Queensland) (20:50): Can I start by congratulating my colleagues on this side who have spoken on these bills on their precise understanding of a very complex tax arrangement in relation to research and development. Senator Back, Senator Bushby and, before that, Senator Colbeck addressed all aspects of the bills in a clinical and forensic way. They particularly went into specific provisions in some detail. In fact, they made such a case that need say little more to indicate why the opposition opposes this legislation: because of the damage it will do to the Australian economy and to Australian innovation. I do not want to go into the bills in the depth that my coalition colleagues have done but wish simply to very briefly lament the Labor government's complete lack of interest in and support for research and development in our country. Since Senator Carr has been in charge of research and development, Australia seems to have gone backwards. In fact, it seems that everything Senator Carr touches goes backwards as well. As a minister for manufacturing he has presided over perhaps the worst set of circumstances that Aust­ralian manufacturing has seen for many a year, and this is from a government that pretends that it is interested in manufacturing workers' jobs. BlueScope Steel's quite tragic decision today is evidence of this. What is the Labor government doing? It is flounder­ing around, saying it is going to provide some money for those who lose their jobs. People who lose their jobs do not want money. They do not want compensation. They want jobs. This government, unfortunately, appears to have absolutely no understanding at all.

What do you think the carbon tax is going to do for manufacturing jobs in Australia? I simply cannot believe that my colleagues opposite in the Labor Party, who supposedly look after the unions that put them in this place, particularly manufacturing unions—and those unions supposedly look after the interests of their members—could possibly support anything as dramatically bad for the Australian economy as the carbon tax will be. We all know that the carbon tax will export Australian jobs offshore, particularly Australian jobs in the manufacturing industries. You do not have to be Einstein—and I am certainly not—to work out why. Australia does have a competitive advantage at the moment because we have some of the cheapest forms of energy of anyone in the world. Because of that, although our wages and working conditions are high, we are able to compete. We have good systems, we have good research and development, and we have moderately priced energy sources. This government is determined to make our energy costs as expensive as any in the world and, in fact, more expensive than most, with the result that jobs will simply go offshore.

That is already starting to happen. Talk to any of the people in the manufacturing industry around Australia and you will hear that, if it has not already happened, the indications are that that is where they are heading if this government continues in the way it has operated in the last couple of years, particularly if it proceeds with a carbon tax. I lament the whole approach of this government of disinterest in research and development and the way that this minister, supposedly supporting manu­facturing and industry in our country, is doing just the exact opposite—and that is only the tip of the iceberg.

With these bills this government will inflict greater pain on the great entrepreneurs who exist in small business and in our large enterprises that are the backbone of continued economic growth in this nation. As I understand it, if passed into law they will considerably cut activity that currently goes into research and development in our country. We on this side believe there are fundamental flaws and problems with this legislation.

The existing R&D tax concessions have delivered excellent results for Australia in the past, and I would suggest that a serious analysis of figures will show that the current concession tax system has played a critical role in fostering increased business investment in R&D. R&D expenditure in business in Australia rose to $16.9 billion in the 2008-09 year, based on the latest figures available from the ABS in September last year. I would hope that it continues to increase in the future, but those statistics point to, up to now, a very impressive increase in R&D spending, particularly during the past decade—that is, the decade of the Howard government—especially in areas of the economy that have been so vital to Australia and that will continue to be important, such as mining and manu­facturing. For the coalition, it will always be a priority to create and foster conditions in Australia that lift productivity, encourage enterprise and stimulate discovery and innovation.

I should note—as my colleagues before me have noted, detailed and dissected much more clinically and forensically—that this legislation weakens the current system. I recognise that the bills have significant limitations in relation to: the start-up date, which has been mentioned by my colleagues; the establishment of the dominant purpose test, which both Senator Bushby and Senator Back immediately before me went into in some length; the application of the feedstock provisions to a wide range of activities and results; and the reduction of support for R&D in the building industry in particular, an industry that has done so much for Australia and is so important to most aspects of our economy. Under these bills, there will be a reduction of support for research and development in the building industry. We also note with some concern the disqualification of many small- and medium-sized businesses from support because of the new rules in respect of their ownership structures and turnover. Many that would previously have been eligible will be disqualified. There is also a requirement for costs to be documented and attributed to core or supporting industries. Previous speakers in this debate have gone into that in some length. There are new provisions relating to third-party investors in firms' research and development and the proposed application of new rules relating to the disposal of R&D results to actions taken prior to the commencement of this legislation. As other speakers from the coalition have pointed out in some detail, these bills have a lot of flaws and simply indicate again that the Labor Party has little interest in fostering the innovation for which Australians have been so well renowned in the past.

I also mention tonight something not directly germane to this legislation: research and development corporations. Senators may be aware that there was a function in Parliament House last week at which the RDCs were celebrating their successes over the years. By and large, the research and development corporations have done fantastic work for Australia with some government seed funding and investment by private and other government agencies. They have really supported Australian research and development in what I might call an applied way. But there was an undercurrent of gloom at the function last week, because a lot of the RDCs are coming up for continuation, or new rounds, of funding. Many of them feel quite concerned that, under this government, the funding is not going to be available. I am told that a lot of the money that used to go into applied research and development in the RDCs has been taken out of that pool and put into what is called centres of excellence. As I understand them, centres of excellence are good things. I do not criticise them but they are, as I understand them, purely science—they are driven by academia. They do not have the same sort of applied approach to research and development that the research and development corporations have. I am concerned for the future of those RDCs and I am picking up from those directly involved a real concern about this government's commitment to any form of research and development.

I urge Senator Carr, the Minister for Innovation, Industry, Science and Research, to reverse what appears to be his current approach of cutting back, scaling back, assistance for research and development in Australia as is demonstrated, I suggest, by this bill before us and by the reduction in funding that has gone to R&D corporations in the term of the Rudd and Gillard govern­ments. I urge the minister and the govern­ment not to deplete further the funding that goes to research and development corpora­tions when their funding comes up for renewal in the new rounds, which I understand will be commencing shortly.

I have indicated, as my colleagues have done, our opposition to these bills. Again, I lament the difficult position which Australian manufacturing finds itself in, particularly under the stewardship of the current minister, Senator Carr. Senator Carr is not a bad sort of fellow, but his under­standing of his job and his ability to assist manufacturing, rather than just by giving outright subsidies, is something that all Australians, and certainly those of us in this parliament, should be very concerned about. I again appeal to those few Labor members in the chamber at the present time: please go back to the unions, who in many cases put you in this parliament. Please take some notice of the members of those unions who are desperately keen to keep their jobs. Forget the rhetoric; forget the politics of all this. Have a look at it yourselves. You must see that, as costs increase in Australia, as the cost of power increases in Australia, Australian manufacturing industries are going to become less and less competitive. The only way they will be able to continue into the future is if a socialist government continues to prop them up with government subsidies. That is not any way to have a manufacturing or any sort of industry in Australia. Industries that cannot make it on their own are certainly on the downhill slope.

The carbon tax is going to put real pressure on most businesses. Over the years, I have spoken about many industries. The cement industry is one that comes immediately to mind. It is a substantial industry in Gladstone, up in the state of Queensland, which I represent, employing a hell of a lot of people. Yet we do not know what concessions it is going to get. I do not think anyone knows, because the detail of this legislation is not out. Ms Gillard will not tell us who the top 500 polluting companies are. It is very clear that the cost will be so great as to encourage industries like the cement industry to look to Indonesia or China for the importation of cement. We are seeing it happen under Senator Carr's watch with BlueScope Steel, and that is just the tip of the iceberg. Motor vehicle companies in Australia are struggling. Some would say they are only continuing under this govern­ment because of subsidies—subsidies that seem to have been given in rather a strange way without much regularity as to who gets what and what gets who, but that is a discussion for another time. It is clear that what manufacturing is left in Australia will not be here once the carbon tax comes in because the carbon tax will add to manufacturing costs—it will add to the cost of living of all of us—and it will make prosperous manufacturing industry a distant memory, a thing of the past, in our country.

I hope that the government has listened to the debate on these bills and, in particular, assessed with an open mind the contributions so well made by Senators Bushby, Back and Colbeck, who have clearly demonstrated the real problems with this legislation. One would hope that the government intended it to provide support for research and development concessions, but it seems, like most things the Labor Party have done to date, particularly in the term of the Gillard government, they have wasted so much money that they have got to claw back what they can. It seems, from my understanding of this legislation, that some might say it is just an exercise in trying to grab some money back so that the budget deficit, which has blown out under Labor, can be reined in a bit. It is a pity that it is in the research and development area that cost savings are being made. I join with my colleagues in asking the government to seriously look at the obvious flaws in this legislation and to do something about them.